South Africa’s 20 years of freedom – achievements and challenges

Battle for a Better Future

As we reach the 20th anniversary of the birth of democracy in South Africa, on 27 April, it seems a perfect opportunity to take a step back and get a long-range perspective on the important question: what has Nelson Mandela’s South Africa done with its freedom?

This seminal question from the Goldman Sachs analysis resonates poignantly with Mandela’s death at the end of last year. With the Two decades of freedom – what South Africa is doing with it, and what needs to be done report in mind, let’s track the 20 years of achievement that frame the Mandela legacy since 1994. Then, let’s scrutinise the critical challenges and opportunities for the future.

The Mandela era delivered a peace and freedom dividend as the foundation for the non-racial democracy epitomised by his visionary leadership. The 2014 elections are upon us, which will launch the ANC government’s fifth term. This will drive the political trajectory of the country for the next five years, shaped by Jacob Zuma’s style and agenda as president. South Africa is a country in waiting – what will the post-Mandela future deliver? Public discourse veers from depressing scenarios of political instability and economic distress to utopian declamation that the ANC will govern forever.

Factual assessments of the economy over the first 20 years of the new South Africa shows headway towards a balance of macroeconomic factors. These factors underpin the economic growth on which the present and future well-being of the country hinges. Achievements include an average gross domestic product (GDP) growth rate of 3.6% between 1994 and 2007, and inflation reduced to 6.3% over the same period. In a historical context, this compares to apartheid South Africa’s disastrous decline in economic growth to an average of 1.4%, and inflation escalating to an average 14.2 % between 1980 and 1994. In these terms, the score card reflects a “golden period” of economic performance and peace dividend for South Africa during the formative years up to 2007. Since then, the global financial crisis and the political shifts that emerged from the ANC’s Polokwane conference have resulted in more subdued growth. The net effect, however, has been impressive performance that transformed South Africa from an US$80 billion to US$400 billion economy.

Given South Africa’s debilitating wealth disparities and inequalities, it is fitting that the poor have benefited from state initiatives in providing social benefits, although much remains to be done. Significantly, monthly social welfare grants now benefit over 16 million people in need. The value to improved quality of life, and consequently to social and political stability, is self-evident.

The rise in disposable income is a clear marker of the emergent African middle class. Between 2001 and 2010, lower-income earners decreased significantly from 52% to 31%, calculated in terms of the Living Standard Measure (LSM). This translates into 4.6 million people lifted out of the lower-income level. Equally significant, close to 10 million people have migrated from the lower- to the middle- and upper-income groups – an upward income shift of an average of 1 million people per year over 10 years. The largest grouping of South Africans is now in the LSM middle-income bracket at 12.3 million, from 7 million of the population a decade earlier. Africans dominate the middle-class consumer segment, while whites on average have become wealthier. The structural impact of this income realignment is a tangible feature of the economic and sociopolitical landscape. A sobering reality is that 85% of Africans remain poor, while 87% of white South Africans are in the middle- to upper-income categories. Upward economic and social mobility is clearly still a work in progress.

What needs to be done? The priorities begin with the public sector. The improvement of productivity that delivers results in terms of “bang for the buck” outcomes is essential, particularly in healthcare and education. Sound management practices that are aligned to measurable performance benchmarks have to be implemented. Youth unemployment is a ticking time bomb that demands concerted government action to stimulate job creation which breaks the stranglehold of a present and future without reasonable prospect to earn a decent living. Ongoing labour conflict is costing the country dearly in lost production and investor confidence. The solution is a labour pact that aligns business, organised labour and the government towards a shared objective of achieving sustainable economic growth and employment, anchored in balanced wage and productivity improvement.

Economic growth requires the conscious promotion of industry expansion and capability, as well as taking steps to stimulate the risk appetite for the exploration of new frontiers for expansion. Strengthening economic links with Africa is an obvious strategy. The competitive advantage of South African home-based expertise and experience is the key to unlock teeming business opportunities in high-growth African markets underpinned by the global appetite for the continent’s rich resource endowment. Foreign direct investment has to be enticed by enhanced investor confidence in the governance credentials, business culture and practices of the country. Innovation must be driven through commensurate investment in research and development that builds the competence and capacity to contend with formidable global competitors aggressively entering African markets.

The future is Africa. From the notion of living in a bad neighbourhood, South Africa is well positioned to benefit from its economic strength in the emerging good neighbourhood of sub-Saharan Africa, which is notching up economic growth that is the envy of the economies in the rich developed world which grapple with flat growth trajectories and stale markets.

South Africa is the largest economy in Africa with US$350 billion GDP, 51 million people, growth at around 3% to 4%, sophisticated markets – the Johannesburg Stock Exchange is one of the largest in the world at around US$750 billion. Africa’s growth potential is massively shaped by the combination of Nigeria, Egypt, Angola and South Africa as mainstream economic performers. Africa’s future is moving from the “lost, hopeless and forgotten continent” to “Africa’s time has come”. South African business enterprise has notched up an impressive performance in moving skills, experience and risk appetite into African markets. A “team South Africa” approach is essential to create and sustain this future. We have the capital, talent and tools to do so. Leaders across government, business, labour, academia, institutions and civil society need to take decisive action to improve competitiveness and overall performance, which is a collective aspiration worthy of pursuing in the founding spirit of the Rainbow Nation.

The desired future for South Africa might appear to be a wish list of what should be done, rather than the sober recognition of the harsh realities of what can, and must, be achieved. The definitive factor that will determine success or failure lies in the nature and quality of the leadership of the country, which will play out in the political arena during the coming months. Mandela’s leadership legacy is now a matter of historical record. His successors have in hand a country of commendable achievements during its formative years. It faces the challenge and opportunity to commit to a quality of leadership that exemplifies a culture of accountability and teamwork. That way lies success, the opposite is too costly to contemplate.

Anton Roodt lectures and consults in strategy, leadership and governance. He wrote this article based on a Wits Business School Master Class presentation given by Colin Coleman, managing director of Goldman Sachs South Africa.